FCA To End Pooling Agreement with Tesla (TSLA) Early, Analyst Calls News a 'Very Big Deal'

May 4, 2021 1:32 PM EDT
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FCA/Stellantis will hit emissions targets in 2021 without environmental credits brought from Tesla (NASDAQ: TSLA), according to reports. In addition, the group plans on negotiating the financial implications of the decision to stop the pooling agreement with Tesla early.

GLJ Research analyst Gordon Johnson, who is bearish on the stock, called this a "very big deal" and shows that investors should not put a multiple on TSLA's 100% margin credit sales.

"First off, this proves our point that investors should not be putting a multiple on TSLA’s credits sales as they are one-time in nature and are permanently going away," Johson commented.

"Secondly, while we do not know the answer to this dynamic, assuming the contract between TSLA and FCA/Stellantis was more of a “call option” structure vs. a “take or pay” agreement, and assuming TSLA recognized revenue before it was actually earned (as our work suggests is a possibility – Ex. 2), this renegotiation could result in TSLA having to reverse/restate revenues," he added.

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